REAL ESTATE - Property outperformed both UK equities and bonds in 2006, returning 17.9% against 16.8% for UK equities and –0.1% for bonds, according to figures just published by IPD.

However, at 3.7% Q4 delivered a return slightly down from the previous quarter, possibly suggesting an incipient slowdown.

Although rental growth reached 1.4% in Q4, up from 0.9% in Q3, the yield impact was down slightly from 1.9% in Q3 to 1.6% in Q4.

Sector-wise, offices led for the fifth consecutive quarter, with a 5.3% return in Q4. Specifically, West End and midtown offices generated a 31.9% return over the year, although office overall performed better than retail, including outside the West End and central London. Retail warehouses – the previous leading segment – returned 15.5% but with rental growth down to 3% for the year.

"The trend was upward until the third quarter," said IPD senior research analyst Angela Sheahan. "There’s always a chance it’s a blip, even though the markets are expecting a slowdown.

"We’ll have to wait and see," she said. If there is a slowdown, it is unlikely to be a significant correction.